Mbe Contracts Part 2- Summer 2009

Front 1

Performance of Contract, Performance of Contracts for a Sale of Goods

Perfect Tender Rule

Back 1

Seller must deliver perfect goods in the right place at the right time. If tender is not perfect, buyer has the right to reject the goods.
- The buyer, if there are some nonconforming goods may reject.

Front 2

Perfect Tender Rule-

Option to Cure

Back 2

A seller who fails to make perfect tender may have an option to cure. This is a second chance. It usually depends on whether the time for performance has expired.

Front 3

Option to Cure- If time HAS NOT Expired

Back 3

Seller has the option to cure.

Front 4

Option to Cure- If time HAS expired

Back 4

the seller will not have the option to cure. If there is specific facts that the buyer would be flexible before and the seller reasonable relied on that flexibility allows the seller to cure.

Front 5

Installment Sales Contracts- Definition

Back 5

Requires or authorizes delivery in separate installments (otherwise, the goods have to be delivered in a single delivery).

Front 6

Installment Sales Contracts

Significance

Back 6

Perfect Tender Rule does not apply, so it is tougher for buyer to reject (Policy: Assumes seller will cure as he performs).

Front 7

ISC- Significance-

Right to reject An INSTALLMENT

Back 7

Only if there's a substantial impairment in the installment that cannot be cured.

Front 8

ISC- Significance-

Right to Reject ENTIRE CONTRACT

Back 8

Only is the defect in an installment substantially impairs the value of the entire contract.

Front 9

Installment Sales Contracts-

Buyer's Acceptance of the goods.

Back 9

This is distinguished between acceptance and the formation of the offer and acceptance

Front 10

ISC- Buyer's acceptance of the goods

Implied Acceptance-

Back 10

When buyer keeps goods without objection after having an opportunity to inspect. REMEMBER- merely paying for the goods is not sufficient for acceptance. Buyer need opportunity to inspect. If the buyer has them for a long time, there is implied acceptance.

Front 11

ISC- Buyer's Acceptance of the goods

Consequences of Acceptance

Back 11

i. too late for the buyer to reject
ii. but buyer who accepts non-conforming goods can still get damages for seller's breach

Front 12

ISC- Buyer's Revocation of Acceptance of goods

G/R

Back 12

A buyer cannot revoke acceptance of goods.

Front 13

ISC- Buyer's Revocation of Acceptance of goods

Exceptions

Back 13

If the non-conformity
i. substantially impairs the value of the goods; and
ii. was difficult to discover (i.e. it was a latent defect.

If satisfied, can revoke within a reasonable amount of time

Front 14

ISC- Consequences of Rejection/Revocation of Acceptance

Back 14

"Return, refund, & Damages"

@ the seller's expense.

Front 15

ISC- Buyer's Payment Obligation-

Back 15

Buyer can pay by check, but seller can refuse it--if seller refuses, buyer has an additional reasonable time to get cash.

Front 16

Performance of Contracts of the Sales of Goods (Article 2)

Performance of Common Law Contracts

Back 16

Under the c/l, performance does not have to be perfect. Substantial Performance is all the is required (i.e. party cannot commit a material breach).

Front 17

Excuse Based on Later Events

Back 17

1. Other Party's Breach
2. Anticipatory Repudiation
3. A Later Agreement by the Parties
4. Impossibility/Impracticability
5. Frustration of Buyer's Primary Purpose

Front 18

Other Party's Breach

Back 18

The other party's breach MAY provide an excuse for non-performance. Whether is does depends on the nature of the contract. Meaning- the rule is different between the Sale of Goods under Article 2 standards versus the common law contracts rule.

Front 19

Other Party's Breach-

Sale of Good's (Article 2)

Back 19

If seller's performance is not perfect in every respect (the Perfect tender rule) buyer has pretty much free reign. (3 options)-

Front 20

Other Party's Breach

Sale of Goods (Article 2)

3 options if the seller breaches

Back 20

Buyer can:
1. accept all of the goods
2. reject all of the goods
3. Accept some and Reject the rest.

**Regardless of which he chooses he can still get damages from the seller.

Front 21

Other Party's Breach

Sale of Goods (Article 2)

C/L Contracts

Back 21

1. Damages- the injured party can recover damages for any breach of contract, whther the breach is material or not
2. Excuse- only a material breach provides for an excuse.

Front 22

Other Party's Breach

Sale of Goods (Article 2)

Divisible Contracts-

Back 22

Where payment is on a per unit basis, the breaching party can recover the contract proce for any unit on which he has substantially performed

Front 23

Anticipatory Repudiation

Back 23

Provides for an excuse for non-performance unless the repudiation is retracted. (b4 the time of performance) There is a difference between A/R and BoK- BoK concerns actions that HAVE already breached the K

Front 24

A/R and Retraction

Back 24

You can retract a declaration and A/R as long as the other party has not relied on your A/R.

Front 25

A Later Agreement by the parties

Back 25

Forms-
1. Rescission
2. Modification
3. Accord and Satisfaction
4. Novation

Front 26

A later agreement by the parties

Rescission

Back 26

An agreement to cancel the K. For rescission to be effective, each party must have some obligation remaining.

Front 27

A later agreement by the parties

Modification

Back 27

An agreement to replace an existing contract with a new one.

Front 28

A later agreement by the parties

Accord and Satisfaction

Back 28

An accord is an agreement to accept performance in FUTURE satisfaction of an existing duty. Satisfaction is performance of the accord.

If there is an agreement of this sort, the non-breaching party may sue under the original K or the Accord made subsequently.

Front 29

What is the difference between the modification and the accord and satisfaction

Back 29

the modification requires performance of the one of the parties obligations NOW

A and S requires that the existing duty to perform be performed in the future.

Front 30

A later agreement by the parties

Novation

Back 30

An Agreement to substitute a new party for an existing one.

A proper novation requires that there is consent from all original parties of the K.

Front 31

Impossibility/Impracticability

Back 31

A later unforseen event that makes performance impossible (c/l) or impracticable (Article 2). (much harder or more expensive) may provide the SELLER with an excuse for non-performance.

Front 32

Impossibility/Impracticability

BAR TIP

Back 32

Impossibility/Impracticability rarely excuses a seller on the MBE

Front 33

Impossibility/Impracticability

Destruction of Something Necessary for Performance

C/L

Back 33

Destruction provides for excuse for non-performance.

Front 34

Impossibility/Impracticability

Destruction of Something Necessary for Performance

Article 2- Sale of Goods

Back 34

Article 2 adopts the same general rule as the common law, but there are two trick questions to look out for.
1. Unidentified Goods-
2. Risk of Loss

Front 35

Impossibility/Impracticability
Destruction of Something Necessary for Performance
Article 2- Sale of Goods
1. Unidentified Goods

Back 35

seller is excused only is the damaged/destroyed goods had been "identified to the K"

Front 36

Impossibility/Impracticability
Destruction of Something Necessary for Performance
Article 2- Sale of Goods
2. Risk of loss

Back 36

a seller who bore RoL when goods were damaged or destroyed is excused by impracticability, but a buyer is not!

Front 37

Impossibility/Impracticability

Death/Incapacity of Essential Person (not just ANY person)

Back 37

For example hiring Van Gogh to paint a unique artwork- not liable. BUT if he was just going to paint a barn, he may be liable. No special skill involved.

Front 38

Impossibility/Impracticability

Supervening Gov't Regulation

Back 38

Excused if a Gov't Regulation subsequently make the obligated act illegal.

Front 39

Frustration of Buyer's Primary Purpose.

Back 39

1. knowledge of why the buyer needs the good.
2. Latent unforeseen event happens.

Buyer is excused (the renting of a Loft to watch the thanksgiving day parade and the parade was canceled)

Front 40

Failure of an Express Condition- (VERY IMPORTANT ON THE MBE)

Definition

Back 40

Limits obligations created by other contract language; it does NOT create an independent obligation. Look for the words like "if", "as long as" "when" "provided that" "on condition that" and "unless"

Front 41

Failure of an Express Condition- (VERY IMPORTANT ON THE MBE)

Strict Compliance

Back 41

REQUIRED. VERY STRICT, can be by a minute or a dollar off.

Front 42

Failure of an Express Condition- (VERY IMPORTANT ON THE MBE)

Satisfaction Clauses

Back 42

"satisfaction" is measured by a reasonable person standard unless the K deals with art or matters of personal taste.

an exception to the reasonable person requirement is if it is art. then the patron must be satisfied.

Front 43

Failure of an Express Condition- (VERY IMPORTANT ON THE MBE)

Types of Expressed Conditions

Back 43

1. Precedent
2. Concurrent
3. Subsequent

Front 44

Failure of an Express Condition- (VERY IMPORTANT ON THE MBE)

Excusing Occurrence of a Condition

Back 44

Occurrence of a condition may be excused by a later action or inaction of the PERSON WHO IS PROTECTED BY THE CONDITION (every condition protects someone)

Front 45

Failure of an Express Condition- (VERY IMPORTANT ON THE MBE)

Excusing Occurrence of a Condition
1- Failure to Cooperate

Back 45

If you fail to try to satisfy the requirement, then you do not have a right to claim that the expressed condition was not satisfied. You cannot cause the action or inaction to occur if you are the protected someone.

Front 46

Excusing Occurrence of a Condition

Waiver

Back 46

Where the party who is protected by the condition voluntarily relinquishes the protection of the condition.

If someone says that I will accept payment without a certificate, that person cannot refuse payment without a certificate.

The one waiving the certificate can retract the waiver as long as the other party has not relied on the waiver.

Front 47

Remedies

Back 47

1. Non-Monetary Remedies
2. Monetary Remedies

Front 48

Remedies- Non-Monetary Remedies

Back 48

1. Specific Performance
2. Unpaid Seller's Right to Reclaim goods (Article 2)
3. Entrustment of Goods (Article 2)
4. Right to Request Assurance in a Sale of Goods (Article 2)

Front 49

Non-monetary Goods-

Specific Performance-

Back 49

An Equitable remedy, availible only if monetary damages are inadequate to compensate the injured party. Whether specific performance is available depends on the nature of the K.
1. Real Property
2. The Sale of Goods (Article 2)
3. Service Ks.

Front 50

Non-Monetary Goods

Specific Performance

Real Property

Back 50

Specific Performance is generally available because real property is considered unique. (even if it is really not that unique).

Front 51

Non-Monetary Remedies

Sale of Goods (Article 2)

Back 51

Specific Performance is available only if the goods are UNIQUE or there are "other proper circumstances" (eg an inability to buy substitute goods in the market)

Antiques, Art, and Custom Goods are examples of Unique.

Front 52

Non-Monetary Remedies

Specific Performance

Service Contracts-

Back 52

Specific Performance is NOT available in service ks, but injunctive relief MAY be available.

Front 53

Non-Monetary Remedies

Unpaid Seller's Right to Reclaim Goods (Article 2)
G/R

Back 53

an unpaid seller has not rights under Article 2 in goods it has delivered to the buyer (note- seller may have rights under federal bankruptcy law.)

Front 54

Exceptions to the general rule regarding the unpaid seller's right to reclaim goods (Article 2)

Back 54

1. If buyer was insolvent when it recieved the goods and the seller makes a demand within 10 DAYS after the buyer received them.
(But the seller has no right to reclaim good from 3rd parties)

2. Seller can reclaim goods at any time if the buyer misrepresented its solvency to the seller in writing within 3 months before delivery.

Front 55

Non-Monetary Remedies

Entrustment of Goods- (Article 2)

Back 55

An owner who entrusts her goods to a MERCHANT who DEALS IN GOODS OF THE KIND (ie a "dealer") has no rights against a BFP of the goods.

EXAM TIP= on the exam, the fact pattern is always the same-- an owner of a jewelry or a car in to be repaired by a merchant who also sells that particular kind of good.

Front 56

Non-Monetary Remedies

Right to Request Assurance in a Sale of Goods (Article 2)

Back 56

A party with REASONABLE GROUNDS for INSECURITY may request IN WRITING ADEQUATE ASSURANCE that the other party will perform in accord with the K.

if the other party does not assure, then the requester has the right to anticipatory repudiation.

Front 57

Monetary Damages (Remedies)

Back 57

1. Punitive Damages
2. Liquidated Damages
3. Expectation Damages
4. Incidental Damages
5. Consequential Damages
6. Avoidable Damages

Front 58

Monetary Remedies

Punitive Damages

Back 58

P.Ds are not awarded for breach of K b/c the purpose of K damages is to compensate, NOT punish

Exam Tip- don't think of "good guy" "bad guy". K remedies are designed to compensate the injured party, not PUNISH the breaching party.

Front 59

Monetary Damages

Liquidated Damages

Back 59

Upheld if damages were DIFFICULT to ESTIMATE in ADVANCE and are a REASONABLE FORECAST of PROBABLY DAMAGES, but L.D.s cannot operate as a penalty

Lump sum damages are not valid.

Front 60

Monetary Damages

Expectation Damages

1. Common Law Damages

Back 60

When you have to replace or you have an expectation of profit, you are entitled to the difference of the new worker and you are entitled to the expectation of profit.

Front 61

Monetary Remedies

Expectation Damages

2. Sale of Goods (Article 2)

Back 61

Buyer has 3 options
a- Cover damages
b- market damages
c- loss in value

Seller has 4 options for damages
a- resale damages
b- market damages
c- lost profits
d- contract price

Front 62

Expectation Damages- Sale of goods

Buyer's Damages

a- Cover Damages

Back 62

cover price-K price (if the buyer covers in good faith- (usual measure))

Front 63

Expectation Damages- Sale of goods

Buyer's Damages

b- Market Damages

Back 63

market price- K price (if buyer doesn't cover in good faith or doesn't cover at all.

Front 64

Expectation Damages- Sale of goods

Buyer's Damages

c- Loss in Value

Back 64

value as promised- value delivered (if buyer keeps non-conforming goods)

buyer is entitled to keep the benefit of the deal

Front 65

Expectation Damages- Sale of goods

Seller's Damages

a- Resale Damages

Back 65

contract price- resale price (if seller resells in good faith)- usual measure

Front 66

Expectation Damages- Sale of goods

Seller's Damages

b- Market Damages

Back 66

contract price- market price (if the seller DOES NOT resell in good faith or DOES NOT resell at all.

Front 67

Expectation Damages- Sale of goods

Seller's Damages

c- Lost Profit

Back 67

Lost profit, is the seller is a lost volume seller

Bar Exam- this is how it always appears in the MBE: A dealer resells the same goods for the same price. The bar examiners are trying to trick you into saying the dealer;s damages are $0. Don't be fooled. The dealer has lost the PROFIT IT WOULD MADE ON THE INITIAL SALE.

Front 68

Expectation Damages- Sale of goods

Seller's Damages

d- Contract Price

Back 68

contract price, if the seller cannot resell the goods. (no market)

Like custom goods.

Front 69

Monetary Remedies

Incidental Damages

General

Back 69

Incidental Damages involve the cost of transporting or caring for goods after breach and costs associated with arranging a substitute transaction. Incidental damages are available to both seller and buyer

Front 70

Monetary Remedies

consequential Damages

General

Back 70

C.D.s are damages that are SPECIAL to this PLAINTIFF and were REASONABLY FORESEEABLE by the BREACHING PARTY at the TIME of the K (note- NOT available to a seller under Article 2)

Front 71

Monetary Damages

Avoidable Damages

General

Back 71

An injured Party cannot recover damages he could have avoided ("mitigated") with reasonable effort

Front 72

Third Party Problems

Back 72

1. 3rd Party Beneficiaries
2. Delegation of Duties
3. Assignment of Rights

Front 73

3rd Party Problems

3rd Party Beneficiaries

Definition

Back 73

two people enter into a K intending to benefit a third party

Front 74

3rd Party Problems

3rd Party Beneficiaries

Example

Back 74

Joe Biden pays Tina Fey $25K to perform for Obama on July 4. Obama is the 3rd party Beneficiary of the K btw Joe and Tina.

Front 75

3rd Party Problems

3rd Party Beneficiaries

Vocab.

Back 75

1. 3rd party beneficiary
2. Promisor
3. Promisee
4. Intended Beneficiary
5. Donee Beneficiary

Front 76

3rd Party Problems

3rd Party Beneficiaries

Vocab. - 3rd party beneficiaries (TPB)

Back 76

A person who is not a party to a K, but has rights under the K b/c it was intended to benefit him (Obama)

Front 77

3rd Party Problems

3rd Party Beneficiaries

Vocab. - Promisor

Back 77

The party who promises to perform for the TPB (Tina Fey)

Front 78

3rd Party Problems

3rd Party Beneficiaries

Vocab. Promisee

Back 78

The party who secures the promise (Joe Biden)

Front 79

3rd Party Problems

3rd Party Beneficiaries

Vocab. Intended Beneficiary

Back 79

The person the K/ing parties intend to benefit (usually in K).

an INCIDENTAL BENEFICIARY- just happens to benefit from the K.

Only an intended beneficiary has legal right who can enforce them.

Front 80

3rd Party Problems

3rd Party Beneficiaries

Vocab. Donee Beneficiary

Back 80

A TPB who receives a GIFT of performance from the promise is a Donee beneficiary (typical). If the promise owes a debt to the TPB, the TPB is a Creditor beneficiary (rare).

Front 81

Third Party Beneficiaries

Rescission and Modification

G/R

Back 81

The promisor and promisee can rescind or modify the contract until the rights of the TPB have "VESTED". If the intended beneficiary learned of the K and relies on it, there cannot be Mod or rescission

Exception- Contrary Language in the contract controls.

Front 82

Third Party Beneficiaries

Right to a 3rd-Party Beneficiary

Against the Promisor

Back 82

An intended beneficiary can sue the breaching promisor even though no Privity of K btw them.

Front 83

Third Party Beneficiaries

Right to a 3rd-Party Beneficiary

Against the Promisee

Back 83

The intended beneficiary can only sue the promisee for the benefit of the contract if the intended beneficiary is a creditor beneficiary.

Front 84

Third Party Beneficiaries

Right of Promisee Against the Promisor

Back 84

It is just like any other contract. this is even true if the intended beneficiary is in fact a donee beneficiary.

Front 85

3rd Party Problems

Delegation of Duties

G/R

Back 85

Contractual duties MAY be delegated w/out consent of the person to whom performance is owed (the obligee)

This is a transfer of the burden under the K

Front 86

3rd Party Problems

Delegation of Duties

Exceptions

Back 86

a- Contract Language Controls- if the contract prohibits "assignment" that also means delegations!!!! watch out on the MBE

b- Special Skill or Reputation- if the skills are different and special (no delegation!!!)

Front 87

3rd Party Problems

Delegation of Duties

Rights of the Obligee

Back 87

a- Against the Delegating Party? D. Party still remains liable.

b- Against the Delegate? no liability unless the delegate of the obligation got consideration from the delegating party.

Front 88

3rd Party Problems-

Assignment of Rights

1. Definition, 2. & 3. Bar Tips

Back 88

1. Two people make a K; later, one (assignor) transfer HIS RIGHTS to a 3rd party (assignee). The party who owes the duty is the Obligor

2. In an assignment, two parties enter a contract and a 3rd person (assignee) appears on later. In a 3rd-party beneficiary situation, all three parties are present from the outset. Don't confuse the doctrines.

3. An assignment of rights transfers only rights (usual case). Assignment of an entire K transfers BOTH RIGHTS AND OBLIGATION

Front 89

3rd Party Problems-

Assignment of Rights

2. Example

Back 89

2. Batman Ks to provide security for Gotham City for $200K. Batman (assignor) assigns his right to payment to Robin (assignee). Robin has the right to receive payment from Gotham City Obligor.

Front 90

3rd Party Problems-

Assignment of Rights

Requirements

Back 90

There needs to be present assignment language.

No consideration necessary.

Front 91

3rd Party Problems-

Assignment of Rights

Restrictions on Assignments-
a- Contract Lang. Control.

Back 91

distinguish a clause that prohibits assignment from one that completely invalidates assignment
- if prohibits, Assignor is liable for breach but assignee is entitled to get paid.
- if completely invalidates, assignment void.

Front 92

3rd Party Problems-

Assignment of Rights

Restrictions on Assignments-
b- cannot substantially change duties of obligor

Back 92

a- changing the obligor duty to pay someone else is not a substantial change.

b- Changing terms of employement (going to work somewhere else) is substantially changing.

Front 93

3rd Party Problems-

Assignment of Rights

Assignee's rights against the obligor

Back 93

Assignee can sue to enforce the assigned K against the Obligor.

If the original (assignor) party fails to perform thereby breaching the K, the assignee cannot collect.

If no knowledge of assignment the obligor is not liable to assignee for remitting payment to the original (assignor).

Front 94

3rd Party Problems-

Assignment of Rights

Multiple Assignments

Back 94

1- Gratuitious (Gift) Assignment:
2- Assignments for Consideration

Front 95

3rd Party Problems-

Assignment of Rights

Multiple Assignments1- Gratuitious (Gift) Assignment:

Back 95

The LAST Gratuitious Assignee in time prevails over the earlier gratuitous assignee b/c later gift assignment revokes an earlier one.

Front 96

3rd Party Problems-

Assignment of Rights

Multiple Assignments- 2- Assignments for Consideration

Back 96

G/R- The first assignee for consideration prevails over all subsequent assignees b/c an assignment for consideration is much more durable than a gratuitous assignment

Bar Tip- If you encounter assignments in a Q, you should analyze each assignment in the order it was made to see f that particular assignment was valid.

Front 97

3rd Party Problems-
Assignment of Rights

Multiple Assignments- 2- Assignments for Consideration- Exception

Back 97

Exception- A later assignee for consideration prevail is he DOES NOT KNOW of the earlier assignments AND is the first to get payment from or a judgment against the obligor.